Wage pressures expected to ease a bit next year

Wage growth is rapid and broad-based. The average gross wage amounted to EUR 1,419, up by 7.4%, over the year, in the second quarter. Wage growth was broad-based, in terms of sectors and levels. Tax Authority’s wage data show that the average gross wage increased among all wage deciles, by around 8%, over the year, in the first half of 2019.

Wage growth in the public sector has exceeded wage growth in the private sector in the past year. Private sector, exposed to global competition, has found it harder lifting its labour costs as rapidly.

As export demand and Estonia’s economy are expected to grow at a slower pace next year, demand for labour should ease, at least in the exporting industry. So, wage growth should moderate, from very high levels (from 8.1% in 2019 to 6.5% in 2020 and 5.5% in 2021). Wages in the public sector are also expected to grow at a slower pace, due to fiscal constraints in the budget.

Source: Swedbank

Employment of 50–74 year olds the highest in 10 years

According to Statistics Estonia, the employment of 50–74 year olds keeps growing. The number of employed people of that age group is the highest in 10 years.

According to Statistics Estonia, in the 2nd quarter of 2019, the unemployment rate was 5.1%, the labour force participation rate 71.7% and the employment rate 68.1%. According to estimates, 667,700 persons were employed and 35,700 were unemployed. The labour market indicators did not change very much compared to the same quarter of 2018.

The number of 5074-year-old employed people (232,500) has continued to increase: by 9,600 compared to last year. In the second quarter of 2019, the employment rate of 5074-year-old population was 59.2% and the unemployment rate 4.7%. The number of unemployed persons decreased by 2,100 compared to the same quarter of 2018. 127,700 of the employed were women and 104,800 men. Compared to the previous year, the number of employed women has increased by 3,400 and employed men by 6,200.

The employment rate for persons aged 25-49 was 83.3% and their unemployment rate was 4%. Compared to the last year, these indicators have not changed very much. The employment rate of 1524-year-old persons was 39.5% and the unemployment rate 14.1%. The high unemployment rate of young people can be explained by the summer season when young people start looking for work and are available to start work within two weeks.

Read more from Statistics Estonia

Labour shortages could ease somewhat next year

According to Statistics Estonia, labour market remained tight but did not improve further in the 2nd quarter. The number of the employed and the number of the unemployed stayed at last year’s level. Employment’s quarterly data are very volatile in Estonia. Employment has increased by +1.0% in the first half of the year, mostly in the services’ sector. The unemployment rate remained low, at 5.1% in the 2nd quarter, slightly above the 4.7% in the first quarter.

The number of job vacancies and the number of persons leaving on their own initiative remains high. The scarcity of labour is more pronounced in the services’ sector (around 1/3 of the companies reporting the scarcity of labour as their main concern) and less acute in manufacturing (1/4 of companies highlighting finding suitable work force as their main challenge). Without foreigners, labour market would be even tighter. There are around 20,000 foreigners working on short-term contracts in Estonia, around 80% from Ukraine.

Wage pressures could ease a bit next year
As export demand and Estonia’s economy are expected to grow at a slower pace next year, demand for labour should ease, at least in the exporting industry. So, wage growth could moderate, from very high levels. Wages in the public sector are also expected to grow at a slower pace, due to fiscal constraints in the budget.

We expect employment to remain at current levels and the unemployment rate to stay low, slightly above 5%, in 2020. The average gross wage should increase by around 8% in 2019, 6.5% in 2020, and 5.5% in 2021.

Source: Swedbank

Production increased in manufacturing

According to Statistics Estonia, in June 2019, the production of industrial enterprises decreased by 4% compared to June 2018. Production increased in manufacturing, but decreased in energy as well as in mining.

In June, the total production in manufacturing was 2% higher than in the corresponding month of 2018. Over a half of the branches of the industry didn’t exceed last year’s volume. The manufacture of food products, computers and electronic products, and other non-metallic mineral products experienced growth, while production fell in the manufacture of wood, fabricated metal products and furniture.

In June, 68% of the total production of manufacturing was sold to the external market. According to unadjusted data, compared to June 2018, the sales of manufacturing production for exports decreased by 2% and sales to the domestic market by 7%.

Compared to June 2018, the production of electricity decreased by 58% and the production of heat by 10%.

In June 2019, compared to May, the seasonally adjusted total industrial production fell by 6% and the production of manufacturing by 4%.

Read more on Statistics Estonia website